This template takes another template-name and some associated pipe-tricked(numbered) parameters (or 'pass parameters'), and aggregates them into an 'example demonstration' of how the template-name template might be used. It's primary use is in instruction and documentation such as this passage.

Up to five pass parameters (numbered) for the specified template are displayed as 'placeholders', and more parameters are shown as "|...", for details see the this talk page.

If given no additional parameters except 'template name' ({{{1}}}), it presents the same as the similar {{Tl}} macro template -- a blue link nested in curly-braces-- the same as a user would apply the template without parameters, but with a noticably clearer font and spacing on most modern browsers.

Comparatively, {{tl}} will not take or display additional parameters, and for minor technical reasons, may preferred for mere listing and referencing in long pages involving a lot of template expansions1.

Additionally, Tlx will take a 'named' parameter 'SISTER' to link interwiki to other sister projects such as one of these examples: '|SISTER=W:', 'Tlx|SISTER=M:', 'Tlx|SISTER=Q:', 'Tlx|SISTER=S:', allowing documentation or discourse about a template across interwiki boundaries. Small 'front end' Shell or convience templates {{tlxw}} and {{tlxm}} are typing-aid templates available at Meta for automatic substitution in discussions about templates on Wikipedia or Meta.

This usage also applies to interwiki capable template variations

{{Tlxc}} -- which links to templates on Wikimedia Commons (The Commons).

{{Tlxw}}
is a generalization of {{tl|x}}, {{tlp|x|y}},
etcetera with arguably better readable
output. This depends on the browser, but too narrow
uses of "{", "|", "}" in conjunction
with links can be hard to read.